MGP disclosed that its second-quarter earnings came in at $1.4 million, down 26% from $1.8 million in the comparable period last fiscal year, while net sales inched up 3%, from $59.4 million to $61.2 million. The sluggish results were not entirely unexpected. As W.D. Crotty noted back in December, MGP slashed its estimates for fiscal 2005 earnings to between $0.40 and $0.50 per share, down from a range of $1.03 to $1.08, while blaming diminished demand for its resistant-starch offerings, which help food makers reduce carbohydrate levels in their products.
MGP's low-carb hangover showed some signs of moderating. The firm did experience a sales decline in its Arise wheat protein isolates, as well as competition in that area from Archer Daniels Midland
Looking ahead, MGP's long-term picture is far from bleak. While Fibersym's use in low-carb items may continue to decline, the additive remains promising for its ability to increase fiber in foods without significantly altering taste. Unlike low-carb offerings, high-fiber foods are likely to remain an important component of healthy diets. The company is currently shopping Fibersym's applications in whole grain products. In addition, MGP is preparing to introduce a new ingredient in its Wheatex line that combines wheat and soy components. Given Dean Foods'
MGP's stock remains pricey, based on the current outlook of fiscal 2005 earnings between $0.40 and $0.50 per share. Still, the company may be worth keeping an eye on.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.